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First Technology Capital, Inc. Plaintiff/Counterclaim v. Jpmorgan Chase Bank

March 15, 2012



This matter is currently before the Court upon the motion of the third-party defendant, James L. Bates, to dismiss the Third-Party Complaint filed by the Defendant/Counterclaimant, JPMorgan Chase Bank, N.A. ("Chase" or "JPMorgan"), pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state claims upon which relief can be granted [DE 13]. This motion is fully briefed and is ripe for review.

Also before the Court is Chase's motion for leave to file a surreply or to strike Bates' reply [DE #16]. Chase contends that Bates' reply improperly asserts new arguments not previously raised in his motion to dismiss and that Chase has not had an opportunity to address. Bates' reply does expand on and provide additional support for arguments raised in his motion to dismiss; however, the Court does not find that striking the reply is necessary in this matter. The Court will deny Chase's motion to strike, but will grant its motion for leave to file a surreply in order to consider Chase's responses to the new arguments raised in the reply brief.


On August 10, 2012, the plaintiff, First Technology Corporation, Inc. ("First Technology" or "FTC"), filed its Petition for Declaration of Rights in Woodford Circuit Court [DE #1]. In its Petition, First Technology alleges that it owns a beneficial trust interest in and to an aircraft leased by the trust to American Airlines. American Airlines has filed for bankruptcy, and First Technology was awarded an Allowable Claim ("the Claim") within the bankruptcy estate of American Airlines. The Claim is the subject of a Uniform Commercial Code security interest in favor of the Federal Deposit Insurance Corporation ("FDIC"), successor in interest to the Tennessee Commerce Bank. First Technology alleges that the lien is filed and of public record in the Office of the Secretary of State of Kentucky.

First Technology contends that numerous financial institutions, including Chase, were interested in purchasing the Claim. On June 28, 2012, First Technology alleges that it conditionally agreed upon the sale of the Claim to Chase based on an email communication from John C. Barone, an employee of Chase, stating: bid is good until 5pm EST [EDT] today, June 28, 2012 and is subject to review of your due diligence and execution of a Transfer of Claim agreement.

First Technology, however, contends that while the parties agreed upon a price, it did not review the due diligence or reach final terms in a written and executed Transfer of Claim agreement which would have made consummation of the transaction contingent upon the release by the FDIC of its lien. Accordingly, First Technology alleges that the parties did not consummate the transaction as conditionally agreed and that a binding contract does not exist. First Technology seeks an adjudication of the rights of the parties and a determination that no contract exists for the sale of the Claim.

Chase filed its notice of removal on September 11, 2012 [DE #1]. On October 12, 2012, Chase filed its Answer, Third Party Complaint against James L. Bates, President and CEO of First Technology, and Counterclaim against First Technology [DE #6]. Chase's Third Party Complaint and Counterclaim against Bates and First Technology sets forth three counts. In the first count, Chase asserts a claim for breach of contract against First Technology. In the second count, Chase asserts a claim for fraud against Bates and First Technology. Finally, in the third count, Chase asserts a claim for negligent representation against Bates and First Technology.

Bates has filed a motion to dismiss the Third Party Complaint against him [DE #13]. Bates' motion contends that Chase's Third Party Complaint against him should be dismissed for the following reasons: (1) it fails to plead the fraud count with the requisite degree of particularity required by Rule 9(b) of the Federal Rules of Civil Procedure; (2) it is inseparably intertwined with the underlying contract action and is, therefore, barred by the economic loss doctrine; (3) it is not actionable under Kentucky law as the fraud and negligent misrepresentation claims relate to future conduct; and (4) it sets forth no factual or legal basis which would allow for the imposition of personal liability against Bates and fails to make any allegations which would permit the Court to pierce the corporate veil of First Technology.


The standard for ruling on a motion to dismiss is that a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), abrogating Conley v. Gibson, 355 U.S. 41 (1957).

While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level.

Id. at 555 (internal citations and quotation marks omitted).

In ruling upon a motion to dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6), all of a plaintiff's allegations are presumed true, and the complaint is construed in the light most favorable to the plaintiff. Hill v. Blue Cross and Blue Shield of Michigan, 409 F.3d 710, 716 (6th Cir. 2005). A district court may not grant a Fed. R. Civ. P. 12(b)(6) motion because it does not believe the complaint's factual allegations. Wright v. MetroHealth Medical Center, 58 F.3d 1130, 1138 (6th Cir.1995). However, "[c]onclusory allegations or legal conclusions masquerading as factual allegations will not suffice." Bishop v. Lucent Technologies, Inc., No. 07-3435 (6th Cir. 3/25/08) (citing Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir. 2005)). "Although we must accept all of the complaint's factual allegations as true, we 'need not accept as true legal conclusions or unwarranted factual inferences.'" Gahafer v. Ford Motor Co., 328 F.3d 859, 861 (6th Cir. 2003) (quoting Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir.1987)).



For purposes of Bates' motion, the Court will accept the facts, as alleged by Chase, as true. On June 22, 2012, at 1:02p.m. EDT, Thomas Bunch, an attorney acting as agent for First Technology, emailed a Chase representative, Matthew Pennella, to solicit a bid for the "sale, assignment and transfer" of First Technology's allowed unsecured Claim of $22,886.139 in American Airlines bankruptcy proceeding. Later that same day, Chase extended a bid to First Technology offering to pay 33 percent of the value of the Claim "which will result in net proceeds to your client of $7,552,425.87" if accepted by "5pm EST [sic] today." Chase alleges that this bid was not accepted, and Chase and First Technology continued to negotiate by email and telephone over the next several days. These negotiations were conducted by John-Carl Barone for Chase and by Bunch, and sometimes Bates, for First Technology.

On June 28, 2012 at 3:51 p.m. EDT, Bunch sent the following email to Barone:

[w]e have a confirmed offer from U.S. Bank for the sale of the AA Allowed Claim of $22 million plus at 35 cents if we accept, confirm and bind ourselves on or before five p.m. Eastern today. Should we accept that offer?

Then, at 4:45 p.m. EDT Barone emailed Bates, with a copy to Bunch offering a "best and final bid" for the sale and transfer of the Claim at a price of 35.75 percent of the allowed amount of the Claim. Barone's email to Bates and Bunch stated (emphasis in original):

First, thank you again for giving JPMorgan the opportunity to bid on your claim, this is an important transaction for us. I understand that you are on a conference call and can't speak, so I spoke with our desk and JPMorgan is please [sic] to provide you with a best and final bid at 35.75% on your $22mm allowed American Airlines, Inc. claim. This bid is good until 5pm EST [sic] today, June 28, 2012 and is subject to review of your due diligence and execution of a Transfer of Claim agreement. We [sic] very interested in working with you on this opportunity and hope this is reflected in our bid. Please confirm via email if we are done and you would like to lock in this price.

At 5:19 p.m. EDT, Bunch sent an email to Barone, with a copy to Bates, showing the previous email from Barone and accepting the offer on behalf of First ...

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